MANAGEMENT'S DISCUSSION AND ANALYSIS Indian Economy According to the World Bank Report, India with large current account and fiscal deficits and weaker growth, was hit particularly hard by a withdrawal of portfolio capital (resulting in steep currency debrciation) in the middle of the year, stemming from apbrhensions of tapering of US quantitative easing. The GDP growth in FY14 is estimated to be around 4.9% as per CSO's estimates. That's technically a recovery from 4.5% GDP growth in FY13 on the back of a monsoon boost for agricultural sector and an improvement in services sector. The World Bank expects the pace of India's economic growth to pick up and stand at 6.2 per cent in FY15 and at 7.1 per cent in FY16. The economy has stabilised in recent quarters, though GDP growth remains well below potential. Downside risks have receded. The rupee is less vulnerable to the US Fed tapering than it was in 2013. The economy will slowly improve across 2014 but not hit potential until well into 2015. Exports have already started to pick up, helping to narrow the CAD and on the home front, fewer downside risks, a more competent central bank governor, and the prospect of better government after the May elections have boosted business and investor confidence. Hyderabad Real Estate The Hyderabad residential market has remained stagnant in 2013 with slight drop in absorption after it went through the lows following the global recession, Satyam scam, State level political crisis and Telangana issue. Factors such as slow economic growth, rising interest rates by banks and high inflation among other factors have added to the uncertainties. The political uncertainties have faded away to an extent with creation of Telangana as the 29th state of India. Clarity on this issue is expected to boost the absorption by the end of the year or early 2015. The Hyderabad real estate market continues to consolidate with prices still at attractive levels in comparison to sister cities of Bangalore and Chennai. The residential prices are likely to firm up across segments in FY15 in wake of the increasing input costs. The off take in commercial and retail market continue to remain cautious and the recovery is expected to be gradual. BUSINESS OVERVIEW The Company undertook a large mid-income residential development in the form of Casa Paradiso at Sanathnagar, Hyderabad. The saleable area of the project is approximately 1.2 million square feet and it comprises of 2 BHK and 3 BHK air-conditioned apartments. The target profile of this project is the middle/upper middle income segment of the market. The project has been designed by Hafeez Contractor, one of the India's largest and most reputed architectural firms. Internal Control Systems and Their Adequacy The Company has a proper and adequate system of Internal Controls which commensurate with the size and nature of business, to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposal and commercial transactions are authorized, recorded and reported correctly. The internal control is supplemented by an extensive programme of internal and external audits. The Company accords great importance to the security of its information assets and has the requisite security controls and checks. Adequate storage and backup system is in place to ensure security and availability of data at all times. Opportunities and Challenges Opportunities: With the new Government at the centre emphasizing on Infrastructural developments, it would create opportunities for housing and real estate sector, which would accelerate the demand for Real Estate. Challenges: While the management of your Company is confident of exploiting the opportunities, it also finds the following challenges: • Time required for obtaining permissions. • Swelling cost of construction. • Acute shortage of skilled workforce at all levels. • Very slow pace of growth in other infrastructure facilities. Risks and Concerns The Company is exposed to different types of risks viz., credit risk, market risk (including liquidity risk), operational risk and legal risk. The Company at regular interval monitors credit and market risk, Legal risk is subject to the review by the legal department. The Company is exposed to specific risks in connection with the management of investments and the environment within which it operates. The Company aims to understand measure and monitor the various risks to which it is exposed and to ensure that it adheres, as far as reasonably and practically possible, to the policies and procedures established by it to mitigate these risks. Cautionary Statement This report may contain forward looking statements. All statements are based on certain assumptions and expectations of future events, the Company cannot guarantee that these are accurate and will materialize in the said order or manner or realized. The Company's performance and results or achievements could thus differ from those projected in any forward looking statements. The Company assumes no responsibility to publicly amend modify or revise such statements based on subsequent events or developments. |